Reader Mailbag #52

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Each Monday, The Simple Dollar opens up the reader mailbags and answers ten to twenty simple questions offered up by the readers on personal finance topics and many other things. Got a question? Ask it in the comments. You might also enjoy the archive of earlier reader mailbags.

As usual, we’ll start things off with a few links to older articles that directly answer questions I’ve heard recently.
I’m 20 Years Old and Have No Debt: When Can I Retire and Live off My Investments?
Seven Ways To Save Money While Cooperating With Your Neighbors – And How To Get Started
Is Not Spending Money Bad For The Economy?

And now for some great reader questions!

Why is growth so important? Every company is always talking about ways to grow their business, looking for new investors so they can grow into new markets, etc. Why do they need to grow? If they’re in the black, why can’t they just keep doing what they’re doing?
- imelda

It’s pretty simple, actually. Publicly-traded companies – those that have issued stocks to the public – are beholden to their stockholders. The stockholders have purchased those stocks with the intent to earn a profit, after all.

There are two ways to provide value to stockholders: paying out dividends or driving up the price of the stock so that it can be sold as a profit. Typically, very stable companies pay out dividends, but, quite frankly, a stable quiet company that pays stable quiet dividends are fairly boring. They don’t get the headlines. They don’t get the attention.

The other route – the one that gets the press – is the growth strategy. If you make the company grow rapidly, the stock value will grow rapidly as well. That’s because a share of stock has a direct relationship to the overall value of the company – if the value of the company goes up, the share usually follows. Thus, many companies shout loudly about their growth strategies in order to drive up that stock value, making the shareholders happy and giving the talking heads on CNBC something to chirp about.

We’ve all absorbed your advice on how to spread the word about our respective blogs when getting started. As a more “established” blog, do you have any other methods you employ to market your blog?
- the weakonomist

To be honest, I’ve never really actively marketed The Simple Dollar aside from occasionally submitting articles to social bookmarking sites.

Instead, I focus hard on writing content and little else. Every time I post an article, I’ve not only thought carefully about what the point of the article is (what sort of useful idea is this conveying), but also who might read it. Is this article one that regular readers will really enjoy? Or is this one that will appeal more to people on social bookmarking sites? Maybe it’s one that will just show up well in Google search results, bringing in readers that way.

It’s all about good content that people want to read. A good product is the best marketing you can have.

Back in my high school classes I learned that the energy needed to start up something is more than what is required to keep it running. Following this logic, is it cheaper to turn lights on and off as I enter and leave the room or to leave them on?
- Jessica

The amount of energy needed to fire up a light bulb is negligible. In simplest form, the light you see is a reaction to the presence of electricity, not a process that starts because you flip the light switch.

It is always worthwhile to flip off the lights when you leave the room for more than a minute or so. The only reason why it’s not useful to flip the switch every time is that each on and off degrades the bulb a bit, leading eventually to the bulb “blowing” and requiring a replacement.

How do you find the books you review?
- Lily

I do a lot of things. I look at the Amazon pages for books I’ve liked and look carefully at the books that are described as “similar.” I use the bibliographies of books I like. I listen to suggestions from readers. I also accept books that publishers send me spontaneously, though I often don’t review them (mostly because they tend to be repetitive).

What I really look for is a book that offers an angle that I really haven’t addressed before. I’m intrigued by books that teach me something new or give me some ideas I haven’t considered before. If I read a book that really does nothing for me, I usually don’t bother to review it.

What should I look for in a condo or townhouse that will make a significant difference in deadening neighbor noise? Or are condos basically the same as apartments, in which case I’m out of luck until I can afford a house? I’d really like to hear others’ experiences and advice before I take on a 15- to 30-year debt!
- Dru

For the most part, you’re out of luck. If the noise is excessive and a public nuisance, you can obviously follow up with law enforcement, but most apartment noise is completely reasonable, even if it is annoying.

Your best bet is to look for thick-walled condos. Test the noise level that comes through the walls, if you can. Take a friend with you, have them tour one condo while you tour another, and have them shout loudly. See if it bothers you – or if you can even hear it. If you’re annoyed by a single person shouting, then the walls are too thin and you’re going to be annoyed by pretty much any neighbor.

I am planning on buying a Nintendo DS soon and was wondering if you think the DSi is worth the wait or higher price? I’ve heard the web browser will be improved dramatically.
- Sarah

For those unaware, the DSi is the upcoming replacement for the Nintendo DS Lite that has been on the market for a few years. The DSi costs $40 more and loses the ability to play old Game Boy Advance games, but it offers quite a few new features: a built in web browser, a digital camera, a larger screen, a built in mp3 player, and the ability to download games wirelessly, none of which were included in the original DS.

To put it simply, if those features are worth $40 to you, then wait. If they’re not, get the DS Lite.

I will say that I’ve played with my DS Lite for hundreds of hours and it’s quite beat up. It also has pretty poor battery life at this point (an hour, maybe less), so I may upgrade to a DSi in the future simply because of battery issues and a very scratched-up touchscreen. Having said that, I will wait until the DSi has been out for a while before upgrading so I can see if there is any compelling DSi-only software.

If you are participating in 401(k) with your employer, and if you are not maxing it out at $15500, can you open an IRA or a Roth IRA by yourself. My employer doesnt offer Roth options and I am more interested in that.
- Saagar

You can participate in a Roth IRA regardless of what you’re doing with a 401(k). You can max out the 401(k) and, if you’re eligible for a Roth IRA, max that out as well.

My suggestion is to only invest in the 401(k) up to the point where you’re getting all of your employer’s match, then fund a Roth IRA. If you still want to save more for retirement, you can put more in the 401(k), but in most situations, a 10% contribution to a 401(k) plus a fully funded Roth IRA should be more than adequate for retirement.

What software do you use for computer backups? I am currently doing automated backups nightly using EMC Retrospect (it came free with my external drive) but would rather use an open source program if a good one is available. I’ve looked through your excellent lists of open source software but didn’t see anything for backups.
- Cynthia Grant

I use a Mac, so I use Time Machine for all my backups. It’s included as a part of Mac OS X. Basically, all you have to do is plug in an external hard drive and it works like a charm.

A friend of mine who uses PCs exclusively swears by Carbonite. I have never used the service – or any PC backup service – so I can’t comment either way on it other than to pass along my friend’s recommendation.

When I used a PC exclusively (a few years ago), I used to just back up my Documents directory to a memory stick at the end of every work session. It was clumsy and manual, but it did the trick.

I am in Canada and Capital One credit card just informed me of a new service that they offer. For $15 a month, they can keep track of our credit card as well as our financial situation with the help of Equifax and Trans Canada ( i think ) bureaus. As well as identity theft. We had it for 3 month but I hated paying $30 a month for this service. Would you recommend it? Or is there something else better that I have not seen? I have it for free with my CIBC bank account, but I would have to look into the identity theft part. Is this a ploy for more money to the cc people?
- Lynn

I generally do not think that credit monitoring services offer enough benefit for the fee that you’re paying, but if you’re strongly worried about identity theft, they can be a worthwhile investment solely to put your mind at ease.

In the United States, at least, I usually encourage people to visit the FTC’s credit reporting service, where you can request a copy of your credit report from each bureau each year. If you do these on a four month cycle – one from Experian in January, one from TransUnion in May, and one from Equifax in September, say – you can keep strong tabs on your credit status.

I think a good way to learn skills around the house is to volunteer with Habitat for Humanity. There are projects around the country and you can help out throughout the building process. Not only do you develop the skills, but you help a great cause as well!
- Seth Rowland

This wasn’t really a question, but instead a brilliant comment that I felt was well worth repeating.

Habitat for Humanity is an incredible charity. Not only does it directly benefit people in your local community that actually need housing help, it doesn’t involve just throwing money at the problem. You’re actually building something tangible that can actually be used for the purpose intended.

Not only that, volunteering for Habitat for Humanity can teach you a ton of carpentry, plumbing, and home repair skills. You can easily learn how to install a toilet, how to hang a door, and countless other little useful skills that you can take home with you and apply in your own life, saving you the cost of having to hire a repairman for those tasks.

It’s a great way to volunteer your time – and you learn something valuable in the process. That’s a great way to spend a Saturday, in my opinion.

Got any questions? Ask them in the comments and I’ll use them in future mailbags.

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48 thoughts on “Reader Mailbag #52

  1. About the light bulbs (I’m talking here specifically about CFLs). While it doesn’t take (significantly) more electricity to start a bulb than it does to run it, turning it on is one thing that contributes significantly to the wearing-out of the bulb. When the box says “10,000 hour lifetime” that number is for turning it on and leaving it; if you were to turn it off and on every 5 minutes, that number of hours would be way less (I don’t have a number on that), so the assumed savings over the lifetime of the bulb goes down. Your electricity bills are low, as advertized, but your CFL-shopping bill might be higher than expected. Many sources recommend not installing CFLs in places that you don’t generally leave the light on longer than 15 minutes, so as to minimize the wear and tear on the bulb. What’s the cheapest way to do it? I’m not really sure. In fact, I’m very curious about this myself, but not enough that I’ve tried to look up life-testing data on the CFLs (manufacturers must have that someplace!), or to do my own experiment and find out. My job is related to this stuff, which partly explains my interest, but my co-workers still think it’s over-the-top.

  2. Could you make some Homebrew with a Can of hopped extract and 2LB dextrose (priming sugar) or sugar and then do a cost breakdown for 6 gallons of beer and do a cost per beer breakdown (6 gallons should make 64 12 oz bottles).

    I think you will find that this will be cheaper than a 24 of Miller lite .

  3. On the need for companies to grow profits.

    My understanding is that companies – especially public companies – are under a great deal of pressure to grow profits so they can increase demand for their shares and enrich the owners of the company – since that is their mission.

    Having said that, its a worthwhile conversation. We’ve all seen how this pursuit can actually KILL the company involved.

    We have to re-examine this blind pursuit of short-term profits and how it relates to long-term viability.

  4. One thing that is often overlooked in growth companies is the capital needed to finance the growth. You often hear that a company increased earnings (profits) by 10% (or whatever), but the leverage taken on often is not considered. Leverage is powerful and can increase earnings, but you’re also increasing the risk the company carries. Warren Buffett has a great discussion of this in his annual letters.

  5. I have a question for you!
    I recently heard an auto expert say that it is no long environmentally responsible or even necessary to change your car’s oil every 3000 miles. He said to cut costs and still maintain your vehicle, 5000 miles between oil changes should be sufficient. What are your thoughts?

  6. I recently sent my financial advisor an email about logging into my account view. (Side note: I have a financial advisor due to my grandmother investing in mutual funds for me since I was born, and they also have set up a Roth IRA for me.) I got a response back that kind of surprised me: “I’m going to ask my assistant, C_____, to help you with the XXXXXX Account
    View, then let’s talk about making some changes to get more conservative -
    less stocks! more bonds, cash, currencies, hedges against the downside!”

    My gut reaction is that it’s a little too late to hedge against the downside, and if anything, I have 35 years until retirement so it’s way too soon to get conservative. What do you think of her response?

  7. In regards to backups, you may want to check out DropBox. It works on Windows, Mac, and Linux – essentially it’s an online file drive.

    I love it!

    -JP

  8. About the condo noise, there are things to look for to help reduce it. They may sound obvious, but they work. Look for a top floor end unit. You then will only share 1 common wall, and your floor is someone else’s ceiling. Try to find a unit that is facing away from the street – let the bulk of the building block that noise for you.

    Also, the Home Owner’s Association should be able to help with excessive noise from the tenants, even if you don’t want to call the cops. HOAs have a lot of teeth, and if they receive numerous complaints of noise, most of their CC&Rs (governing regulations) allow for fines to be assessed for a continuing nuisance.

  9. I once watched an episode of mythbusters where they tested whether is was more economical to turn your lights off when you left the room or leave them on. They found that if you leave the room for more than one second, it uses less energy to turn the lights off when you leave.

  10. I have a friend who was just looking into condo’s and said the way the are constructed makes a great deal of difference. For example, studs between the units, the more expensive ones he looked at had stagered studs so the dry wall in the ajoining unit isn’t nailed to the same studs as yours preventing noise vibration between the units. Also the more expensive ones had greater insulation between the units. And the plumbing is also insulated so you don’t hear your neighbor flush at 2 am.
    Just a thought

  11. Interesting comment about Habitat for Humanity. I had never thought about that before. I have some friends who are really handy and figured they could help me if it came to that, but it’s so much better to have some knowledge myself. I’m not in the market for a house any time soon, but when I start looking, I might start volunteering as well. Thanks!

  12. One caution on the HFH volunteering – don’t go expecting you can dictate what trades you’ll help with (unless you’re a skilled trade of course). In the chapters I work with they’re pretty good about getting you some variety in your tasks but there are some days you may be hauling waste in a wheelbarrow or cutting down brush all day. They don’t necessarily want to hear that you’re only interested in plumbing because you plan on redoing your bathroom or whatever. But it’s definitely a great cause, great fun and also a really good teambuilding event for coworkers or professional organizations.

  13. A couple of comments – Older buildings seem to have better insulation against noise than newer ones – not always, but often.

    I know it was probably an old question, but for the record, the limit on 401(k) contributions is $16,500 for 2009. For 2008, it was $15,500.

    Love the blog.

  14. For backups on Windows, I use Jungle Disk (http://jungledisk.com) to back up to Amazon S3. It’s automated, easy, and can be used as a network drive as well. After using it myself, I set it up for my parents, who were backing up manually to CD-Rs. I haven’t heard anything from them, so I know it’s working for them as well.

    I’m not associated with Jungle Disk in any way other than being a happy customer. I recommend EVERYONE do some sort of automated backup.

    -Erica

  15. Trent, thank you SO MUCH for responding to my question! It is such a basic question that it has been hard to find an answer to. Your response, plus those of some of the reviewers, are really helpful.

  16. @Jessica, re oil changes: You must follow the recommended interval to satisfy the warranty, if your vehicle still has that. Having said that, your need for oil changes depends on how the car is used. If you commute 50 miles every day (so that the engine gets up to full operating temperature and holds it for a while) and if your air is clean, then you don’t need them so often. If, on the other hand, your local temperature is zero and you start cold and drive six blocks and stay there all day while the engine cools down agian, then you need more frequent oil changes. If you drive on dirt roads, you need them more frequently.

    If the cost of oil changes is a concern, you may wish to do them yourself. Compare the cost of doing it at a garage or oil change shop against buying four or five quarts of oil and a filter. Consider the value of your time; it will take 20 to 30 minutes. You need a place where you can safely wiggle underneath about one foot to reach the drain plug (i.e. not on the street!). You will have a one-time cost for some tools (filter wrench, drain plug wrench, shallow pan to catch the drained oil). You can use a gallon milk jug or windshield washer fluid jug to store the used oil. You will have to find a place to dispose of the old dirty stuff, as well.

  17. Re condos & townhomes – the common wall in some modern condos and townhomes is actually a double wall with about a gap of 4″ between the walls. The gap is insulated. Check with the builder.

  18. just a thought about companies expanding, going public, etc.

    In light of seeing places like Circuit City go belly up, I don’t have ANY sympathy for them. They got big by buying out Mom & Pop businesses, and by offering more services and initially better prices than the smaller places. Then, the prices went up, and they got too big. Now they’re selling out. I’m EXCITED by it. You know why? It gives a chance for Mom & Pop places to return. There’s a reason places like J&R Electronics and P.C. Richards stay in business. They’re as big as they can manage, and they live within their means. Their business models aren’t determined by profit driven stockholders; they’re in for money, of course. But, it’s sensible, instead of ridiculous.

  19. You might as well say that a cancer has made a contract with its cells to grow. And now there are more cells than ever, so the body must be getting rich!

    (If you think this is a stupid analogy, go read Renaissance economics books. They compare the health of a country to the health of a body often.)

  20. By the way, I guess #52 means you’ve been doing mailbags for a year. I’m glad it hasn’t run out of steam yet.

  21. What should I look for in a condo or townhouse that will make a significant difference in deadening neighbor noise?

    A stop-gap blank space between walls, jagged 2×4 studs, double-layers of dry-wall, foam insulation, and smart layout (no bathrooms next to bedrooms, etc.)

  22. For backups, I use Mozy as an off-site backup (free for 2gb, $4.99 a month for unlimited storage). They have a client which runs automatically once you get it started. And it was easy to set up.

    File retrievals are free if done online, but there is a fee if you want a DVD with your backups mailed to you. I’ve done a couple of online file retrievals, without trouble.

    The benefit of off-site backup is if something happens which physically damages your computer equipment (fire or flooding), the backups are safe.

  23. @Dru: You need to check the ceilings too. My apartment seemed great because we share no walls with neighbors. However, after we moved in, we discovered we could hear the upstairs tenant *walking.* (We can track her movements in her apartment.) She’s this short Asian woman, so it much be poor construction. Can anyone suggest anything that would minimize the noise coming down from the ceiling?

  24. To add to what others have said about condo’s – a lot of it boils down to the unit itself. A concrete building will be much quieter, as you’ll almost never be able to fully deaden sound in wood-structured units. Some buildings are better than others. Plus, being on the ground or top floor, and next to dead areas (like fire escapes, etc) also help a great deal. Most importantly, take a minute or two to get to know your neighbor. Establishing a good relationship with them can make life a lot easier if things get too loud.

    Another key thing to check in the Condo/HOA bylaws. Short of someone breaking the local (by)laws, you’re at the mercy of the Condo board/HOA for dispute resolution. It’s good to check and see what the “official” rules are, and even better, speak to someone on the condo/HOA board and see what their thoughts are. A lot of people don’t appreciate that you’re very much at their mercy when things go wrong. A crappy board can make trouble resolution a living hell.

    A quick note about backup – ClickFree’s products are worth checking into (Google ‘Clickfree’). They’re literally the quickest and easiest solution on the market right now for PCs. Mac’s obviously have Time Machine, which for the average user is a home run on Apple’s part.

  25. Trent – You always recommend people to invest only what the will employer match into the 401k and the rest into a Roth IRA. Why is that? It makes more sense and cents to invest the max one can deduct from their taxable income(i.e $5000 for this year) then if you have more to invest then invest in a Roth IRA or Roth 401k.

    It’s best to lower your current tax burden and then worry about future tax burden.

  26. Re the quiet condo question
    Look for a concrete building. Take a corner unit. Look at the bylaws to see what restrictions there may be on an owner replacing wall to wall carpet with wood, tile or laminate. In an already inhabited building you should view the suite 2 or 3 times, trying to pick times of the day when your neighbours are likely to be around (like just before dinner time). Not only might you discover that the lady upstairs likes to walk around in high heels for a while after getting home from work, you may discover whether the neighbours on your floor tend to odiferous dinners. Some condos have a (building code mandated) gap at the front door between the bottom of the door and the threshold. If you’re sensitive to smells you might not want to live next to someone who cooks a lot of cabbage or fish or curry. Or to a smoker, for that matter.

  27. So the growth thing only really applies to publicly traded companies? Interesting.

    I’ve always wondered why companies change and shift when they have a good thing going. Expanding and adding new things usually kills the integrity of the company and turns me off of them. I might just be too idealistic for my own good…

  28. Trent,

    Is it possible that your DS Lite is actually faulty? That battery life is shocking. We’ve had two consoles for three years now and our battery life has not noticeably changed during their life so far. I would say that compared to some kids I know that play on them for hours after school every day (parents?), ours have light to medium use. However, this would run into the several hundred hours each too. They’re great for travelling, from the 90 minutes to the beach to the 28-41 hours (depending on flight prices) to visit Grandma on the other side of the world that we’ve done twice.

  29. “About the light bulbs (I’m talking here specifically about CFLs). While it doesn’t take (significantly) more electricity to start a bulb than it does to run it, turning it on is one thing that contributes significantly to the wearing-out of the bulb.”

    That’s true, although newer ones are rated for 500 000 or more switches, which should still last a few years even when switching them often. They aren’t the cheapest ones though, and are usually sold by brand names.

  30. Regarding companies and growth, Trent is right that public companies are under constant pressure to design and deliver on ‘the growth strategy’. At a more fundamental level, however, all businesses must pursue growth or suffer themselves to go backwards. A business that makes $100K clear profit every year will have, over time, less and less money to spend on the things it needs to run. This is because the value of a dollar declines over time. The value of the business’s profits decreases but the cost of machinery, supplies, stock, wages, premises etc increases. The only way to keep the business afloat is to grow profits to stay ahead of inflation. As that would be running just to stand still, most businesses try for a better growth rate, one that gives the owners a reasonable return for the money they’ve invested. This is as true of the local hairdresser as it is of Coca Cola.

  31. Habitat for Humanity is a great experience.
    You can deduct the miles for the trip for going to meeting on your taxes schedule A.

  32. I’ve volunteered with Habitat for Humanity since 2002. It’s a great way to learn homebuilding skills. Plus, I’ve been all over the word: New Zealand, Poland, Argentina, to name a few. I consider it a volunteer vacation. There are so many benefits: I’ve made some amazing friends and helped so many families. But an earlier commenter was right: Don’t go in expecting to learn specific skills. There is already a list of tasks made before you even step foot on a site as a team. You can then volunteer for whatever you want. Just don’t be disappointed. You really are there to help others, not yourself.

  33. I just recently got an iTouch as a present. What apps and features do you like and use the most on yours?

  34. Lady Jane, that is not a good answer because growth is considered to be net of inflation and the costs of doing business.

  35. Question for a future mailbag – Do you listen to your local NPR station? If so, do you pledge during their fund drives?

  36. @Dru

    There’s actually a lot you can do to eliminate noise, but most aren’t really cheap.

    1. Insulation. Most places have poor if any insulation in the walls. Look towards putting some sort of foam insulation in the walls and you can greatly reduce noise.
    2. More barriers. Add storm windows or something like that to increase the difficulty for sound to come in.
    3. Noise machines. Look to get a good white noise machine (like the ones by Marpac) to help drown out the little bumps in the night. This is also the cheapest option.

    Don’t forget though, that if you are dealing with cheap construction even cats above can sound like elephants. So I would recommend getting the condo on the top if you’re aiming for peace and quiet.

  37. about the condo- units that share a common wall along the garage have much less noise than units that share a common wall along a living or sleeping area. hard to find, but well worth it.

    about the lightbulbs- the tv show “mythbusters” actually tested this on an old episode. they found that more energy was used by keeping the light on when not needed; energy was saved by turning the light off when unused, even for a short time.

  38. Question for mailbag – For your online business, how do you go about doing all of your taxes? Did you setup an LLC or something similar?

  39. Re turning lights on/off, I think there is one exception- outdoor lightbulbs in cold weather- the bulb next to my door seems to last much longer if left on through the winter rather than turned on and off.

    Also I have a question-
    I’m in my 20s, watching the real estate bubble start to pop in my area (Arlington VA), and thinking maybe I could afford to buy a home in a few years, so I’m wondering how to improve my credit score while saving for a downpayment. I don’t have anything BAD on my credit report, but I’m not sure if I have enough of a positive credit history to get a mortgage with a good rate. I’ve had one Visa with a $500 limit that I’ve used/paid over the last 5 years (before that I had a secured card I cancelled after a year because of the fees; I also have a company credit card I can and do use for personal charges but it doesn’t show up on my credit reports). Over the years I’ve also opened 3 store card accounts for discounts on large purchases, but don’t regularly use any of them (one is closed, 2 are still open). I’ve never had student loans or car loans (family is wonderful!). What, if anything, would you suggest I do over the next few years to improve my credit history/score so I can get a mortgage? Also, at some point I’d like to change employers, is there a minimum length of employment at your current job when looking for a mortgage?

  40. Michael @ 30, yes I should have said earnings rather than profit. If the business earns the same amount every year before expenses are deducted, the value of the earnings will decline but the cost of the expenses will increase. The business will go backwards if it does not increase earnings at least in line with the growth in expenses.

  41. I’ve got a question that is probably one that you get pretty often…

    I recently made a pretty bad purchasing decision which involved me opening a new line of credit at a store (online) and cost me quite a bit of money. I was tempted because of the no interest/no payments deal they had going, but in retrospect I regret spending so much. The deal expires in July, a year after the purchase, and I’m struggling to make ends meet as it is. I’m sitting on an ‘emergency fund’ that is about half of what I owe, plus I have other credit card debt as well. My job situation is bleak at best; I’m currently making minimum wage and the job market around here is horrible. I’ve tried to apply for many other various positions, but it seems that nobody is hiring.

    I don’t know what to do exactly – I could pay off most of it and completely deplete my ‘emergency fund’ (keeping in mind I’m in college, so it’s not large AND I could probably turn to my parents still if worse came to worst), I could pay off some of it while still being able to maintain some emergency money, or I could turn to my parents to see if they could give me some money to pay off my debt.

    What are your thoughts on the situation? Obviously I’ve learned from my mistake and I’ve been saving diligently as much as I can, but I still can’t make ends meet. Please advise!

  42. Ok, I just read the MSN “Getting by on…..” series, and I want to puke a little bit.

    The “Getting by on…. $400,000 a year couple” just blew my mind into bits. Especially the caveat “$400,000 may SOUND like a lot, but remember, in Kansas that’s only $180,000.” OH! Thank you MSN! Now thanks to that example I can finally see the poverty they are living in, struggling to raise two whole kids.

    Anyone else read it and have the same reaction? Or am I just being classist here?

  43. Sophia #45
    I’m as shocked as you are, we make a lot less then that. It seems to revolve around what people think is important. I grew up in a 2 bedroom apt, 1 bathroom and there were 6 of us and we had a SAHM. My sisters slept in a double bed, mom would not have bunk beds after the sales guy told her if there was a fire the one on the top would probably die from smoke. I love these TV shows about how people need more room for their growing family, every kid needs his own room, they need more room for their stuff, I see how we got into this financial mess in the first place. I find it sad.

  44. Hey Trent, I wanted to ask you about owning a rental property. My husband and I want to take advantage of the low housing prices in SE Michigan to get into a larger house. We are expecting our second in September and plan to have at least 4 kids altogether. We need a larger kitchen and bathroom for sure, but another bedroom wouldn’t hurt either! My husband’s job is still secure (not related to the auto industry) and we are considering keeping our current home as a rental property. We don’t think we will be able to sell it now for enough to cover what we owe currently (around 90,000 and houses are selling for around 70,000). We plan to keep it for a few years until the market improves and then sell it off. We’ve already been approved for a second mortgage (and FHA loan for 180,000 with 3% down) for the new purchase. If we lost a renter for a few months we would be able to pay for both mortgages without it affecting our regular costs/savings goals. (we would be able to pay both and still have about 400 a month after we pay all our other bills, tithe, and sock away for retirement) We don’t have much of an emergency fund (we have enough for the down payment and about 3000 above and beyond that), but we are currently able to put about 2000 into our savings account each month (when we really stick to our budget!)

    My question is this: Is that taking on too much risk in your opinion? Or should we try to take advantage of the market and get into a house we will stay in until we retire? Also, without an emergency fund built up, should we just wait a bit longer to try and cushion ourselves a bit more? (we’re worried house prices will rise and we’ll be priced out of the neighborhoods we’re looking at!) Thanks for the advice!

  45. Condo noise: the top floor can be noisy from rain on the roof, fans, elevators, etc. I thought condos would be better constructed than apartments – but they certainly are not. You take your chances with any any any condo. And for a noise machine — I’ve found a fan helps, even running all night.

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